Public Bill Committee

[Sir Roger Gale in the Chair]
Written evidence to be reported to the House
CA 01 Department for Transport, Trade Union Side
CA 02 British Air Transport Association
CA 03 British Airline Pilots Association

The Committee deliberated in private.

Examination of Witness

Anthony Smith gave evidence.

Q 9797

Roger Gale: We shall now take oral evidence from Passenger Focus. Welcome to the sitting. Would you care to introduce yourself for the benefit of those who cannot see your nameplate?

Anthony Smith:  I am Anthony Smith, chief executive of Passenger Focus.

Roger Gale: Thank you for coming. The Minister will start the questioning.

Q 98

Theresa Villiers: I would be very interested to hear your thoughts on the appropriateness of moving to a system in which the primary duty on the Civil Aviation Authority is to have regard to the end-user, and on how that compares with your experience in other regulated sectors.

Anthony Smith:  That shift is absolutely essential. The purpose of all this activity, the purpose of the transport sector, is to move people. Regulation mimicking competition where it does not exist or enforcing licence regulations must have the user at its heart. If it has other interests there, in terms of the industry involved or other players, it will get confused, and the regulation will become very opaque indeed, so that aspect of the Bill is absolutely essential. We have seen that in our relationship with the Office of Rail Regulation over the years and its emphasis on putting the user, be it the passenger or the freight user, at the heart of its regulatory activities. That experience, gained over many years, shows quite clearly that it is the right approach. So from our experience, we would fully endorse that move.

Q 99

Theresa Villiers: That is very welcome. The CAA is reforming its approach to consumer matters with its proposed new consumer panel. Part of its remit will involve research on what passengers want. Do you have any thoughts that you could express to us as a result of your experience on these matters? I ask that because of course passenger-focused research has proved extremely useful in other sectors of the transport industry.

Anthony Smith:  We base all our work on research. We carry out the rail national passenger survey, which talks to about 65,000 passengers a year. We now do a bus passenger survey, which talks to about 40,000 bus passengers a year. That gives an independent view of what passengers think about the services that they are currently getting, what they think about stations and what they think about information; and it gives a sense of priorities for improvement in the future. For any regulator or consumer body, not to have access to primary consumer research means that they are simply acting on anecdote and invalidating a lot of what could be done. It is a key part of what needs to be pushed forward. What we have learned at Passenger Focus, from adopting this method in the past six years of using research to drive change, is that it is very effective because you cannot quibble with it. If you do not quibble with the methodology, the results are the results. They are what passengers are saying and they should form a common basis on which all parties can group decisions.

Q 100

Jim Fitzpatrick: One aspect of the Bill is the suggestion of having inter-terminal competition in future. Have you had a chance to look at that, and do you think it would be appropriate in the UK, given that it is not expected to be relevant at this point in time? We have been told that it has been incorporated into the Bill so that in the future the CAA will not have to come back to Parliament if it does become appropriate.
Secondly, there is a clear difference of opinion between airports and airlines about airlines having a secondary duty. The CAA was very strong this morning in its view that there should be a secondary duty. Is that something you have had a chance to look at?

Anthony Smith:  In any industry, the best protection for consumers is competition. That is quite clear from all the experience of the regulated industries over the years. In the absence of competition the more competition you can introduce, and the more information you can introduce to any regulatory system, will benefit consumers. The provision of airline services does look pretty competitive. Airlines are at each other’s throats. They are competing on price, quality, food, seat pitches or whatever. It is at airports where there is a lack of competition. Most airports have a monopoly for a variety of reasons, as you all well know. It is in those sectors where consumer power can be more brought to bear. Inter-terminal competition sounds like a sensible way forward, because it would increase accountability, transparency, information and, hopefully, choice.
On the second question about having a secondary duty, to pick up the point I gave in the original answer, that would be a mistake. I think a secondary duty would cloud what the regulator is trying to do. It would give a trump card to the industry that it should not have. The industry already has rights to appeal, through various mechanisms, against various decisions. Of course, the industry is well able to look after its own interests in terms of efficacy or whatever, so having the key primary duty focused on the user is actually, ultimately, to everyone’s benefit.

Q 101

Mike Freer: Mr Smith, you welcomed the Bill, particularly because it puts the user at the heart. The publication of information provision seems to stop at the arrivals hall, which is a fairly big part of the customer experience. Do you have a view on whether the provisions on the publication of information—on, say, queuing times—should be extended to include the UK Border Agency operation at the arrivals hall?

Anthony Smith:  The power of information cannot be underestimated. Most passengers will not actually spend much time poring over the information, or using it to complain to BAA, Edinburgh airport or whoever. However, for interested parties the access to that information is key. It enables you to drive change. The work we do with the rail and bus industry—the fact that independent comparative data are available does not allow us to tell people how to run the industry, but allows us, the regulator and the others to say, “They’re doing quite well. You’re not doing quite so well. Why is that?” It starts the conversation about the provision and quality of services in a sensible place, rather than, as I say, a string of anecdotes. I argue that the power to request and publish that information should be as wide as possible, as is commensurate with the commercial interests of the parties involved. The more information you get out there, passengers will be better looked after.

Q 102

Gavin Shuker: Mr Smith, thanks for coming in today. Thinking about your experience in research, particularly in the rail industry, passengers will report general levels of satisfaction for different reasons—they could be related to the rail company, to Network Rail, the Office of the Rail Regulator. Various people are involved in that. Translating that into the airline experience, how easy do you think the CAA will find it to look through that information and correctly discern where problems lie? Various people are involved in that. Translating that into the airline experience, how easy do you think the CAA will find it to look through that information and correctly discern where problems lie? As we know, there are airlines, airports and the UK Border Agency, for example. How difficult is it, when you get the raw information, to divide up whose responsibility problems are?

Anthony Smith:  In the rail industry, it is relatively straightforward, because, by and large, you are dealing with the person you have paid the money to. Therefore, the primary, contractual relationship is between the passenger—the consumer—and the rail company. That is quite straightforward, and it is the same on the buses. We can sort out afterwards who is responsible for the decisions and the actions behind that, be it Network Rail, the local authority or whoever. But the primary responsibility is between the person who has paid the money and the person who is providing the service. We can then unpick, from the data, where the real problems lie. We can find out from the data what the drivers of satisfaction are and what the drivers of dissatisfaction are when people are answering questions about overall satisfaction. That helps you understand the ways you can perhaps direct your attention. The quality of the research that is now possible means that the CAA would have absolutely no problems doing those things and would find that really useful.

Q 103

Gavin Shuker: In terms of the Bill, as you understand it, giving those powers to the CAA, do you see the CAA having any problems in being able to enforce its will on different parts of the industry?

Anthony Smith:  I think these things are always best done as a partnership, rather than through people having to enforce their rights against each other. Clearly, there is quite a history of bitter arguments about what should be done at airports and what should not be done, and about how much should be spent and how much should not be spent. I would hope that the provision of more independent information, or more consumer information, would help gather people round some sensible decisions, because passengers’ interests over the next 12 months will be quite different from passengers’ interests over the next 25 years. Through research, you can help define what the generalised passenger interest is. We have a lot of input into the rail industry’s long-term planning processes, be it five years or 15 years ahead. For example, as I think you will know, we have just done a piece of work with Network Rail about what to do with the spare capacity on the west coast once High Speed 2 is built, and that is talking about 2026. There are perfectly valid research methodologies that can bring out very clear conclusions about what people want, and I cannot see anything so different about the airline and airport sector which would mean that you could do these things with railways but you could not do them with airports.

Q 104

Nigel Mills: One of the issues passengers have with airports and airlines is that you get a headline price for your flight, but by the time you have paid baggage charges, seat charges, trolley fees and, heaven forbid, use-of-toilet fees, and you have been corralled through a duty-free shop where people try to flog you drink and cigarettes, you feel the system has milked you from every angle. In terms of the information passengers need, do you think airports should be made, in the way that airlines now are, to publish all the different charges they will try to sneak in from when passengers get someone to drop them off by car and they finally get on the plane?

Anthony Smith:  As I said before, the more information, the better. The proposition has to be clear. We have done a lot of work with the rail industry about the clarity of information that is available when you are buying a rail ticket and about what you are buying. It is quite clear in the rail industry that there is some way to go in making things as clear as they could be. If consumers are to have confidence in an industry, and if they are to have confidence in a system that is looking after them, the clarity of the charges and the price is paramount. If people do not have confidence in those things, and they feel they are somehow being fleeced or not being given all the information, that saps the value-for-money rating they will give. We have seen that quite strongly in the rail industry, where overall satisfaction is relatively high as a result of investment over the last few years, but value-for-money ratings remain relatively low. It is quite interesting to think why that gap is there.

Q 105

Nigel Mills: On that topic, one thing that must give passengers some comfort is that if an airline—especially a charter airline—goes bust on them, they will get flown back or they will get a refund. It is not easy for many passengers to work out what is actually covered by the ATOL regime, or similar regimes, and what is not. Do you think the extensions the Bill proposes to such regimes will help passengers understand when they are protected and when not?

Anthony Smith:  To be honest, I would hesitate to say that I have the exact detail of the Bill clear in my mind in respect of that precise question. Again, I think clarity around that sort of thing is helpful. You do not want to find that your holiday or whatever is not bonded.

Q 106

John Woodcock: Can I just pick you up on what you said about the more information the better? Give me your views if you can about simplicity and clarity. Can there not be a danger of confusion with too much information? Do you have any insight in relation to that into the environmental information that is to be published, and whether it should be in a particular form? I do not know how much you have looked at it so far.

Anthony Smith:  The key tenet of any consumer information is that it must be comparable. That is quite clear. If it is not comparable, you are looking at apples and pears across one industry or different ones. It has to be clear, relevant and couched in simple language. We work hard with the rail and bus industries to do that with regard to the passenger information that we put forward in those sectors.
You are right that the absence of competition, especially at airports, probably argues for a higher level of information than perhaps you might have if there were more intense competition. Usually, if competition is providing the protection that consumers want, you can perhaps have slightly less information available. When there is less choice, as there often is in the rail sector and possibly the airport sector, the hurdle for information should be set higher.

Q 107

Henry Smith: Following on from Mr Woodcock’s question, I agree with your assessment that as much information as possible is important. With specific regard to environmental data, which the CAA will have a duty to publish under the Bill, do you think that will really affect passenger choice as to which airport they use? Or is this just an additional piece of information? Will it change travel habits in any real sense?

Anthony Smith:  Personally, I would need a bit of convincing that it was going to change people’s travel habits. We once did a bit of work about passengers and the environment. It was the shortest session of focus groups I have done in my life. It was quite embarrassing; they lasted about 10 minutes and then people got into the sandwiches straightaway. The view very much was that public transport is green. That is it. There was nothing else to say particularly, because compared with other modes, it is green. People do not know whether they are on an electric or diesel train by and large; they do not have a clue. The sense is that it is green. The way all of us make travel choices is based on cost and convenience by and large.
There is a small number of people for whom green issues are a key factor. That is great, that is up to them. For the vast majority of people, when you look at how people travel, it is the interrelationship between cost and convenience, and people trade those two things, often very subtly, about which train station they drive to, where they park in the car park, where they stand. There are very subtle decisions that people make to speed themselves up. I am fundamentally to be convinced that the green argument has really arrived in terms of travel. That is certainly in terms of rail and bus. As regards air, I think it is even more difficult to say.

Fiona O'Donnell: Could I press you further on that? We discussed the same question this morning and compared the way that white goods are given energy-efficiency ratings. Do you think part of the reason why the public do not really engage with environmental issues when it comes to transport has to do with the way the information is presented to them?

Anthony Smith:  I think it is partly that, but I still think it has a lot to do with the fact that people make choices in a very simple way. “How much does it cost? When is the next bus?” That is very simple stuff. You could present vast amounts more of information but I am not sure that people would find it terribly helpful, to be honest. Anything you can do to simplify the information, such as with white goods, to make it comparable and so on will help, but I am not sure it is going to drive decision making.

Q 108

John Woodcock: To follow on from that, why do you think it is a good thing that the lack of competition means that there should be a higher level of information? If you are profoundly sceptical as to whether it will change behaviour, why would you put those reporting requirements on?

Anthony Smith:  Sorry, I did not make that clear. I was making the distinction between environmental information and more generalised consumer information, about queuing times, baggage waiting times—that sort of information.

Q 109

John Woodcock: So I probably was not clear enough in my initial question, when I was actually talking about environmental information. What value do you think it would have?

Anthony Smith:  I think it has a much more generalised value, making people aware of the impact of their decisions—simple as that. It is not for any of us to dictate what people do, but I think the more people are informed about the impact of their decisions, the more they can make informed decisions, which is probably what all consumers ultimately want to make.

Q 110

Pat Glass: Mr Smith, you have probably answered my question. How far do you think people make green choices on the basis of the information that they have? Before I came into Parliament, I worked for a company and every time I made a journey or had a ticket, they wrote on that ticket the impact of the journey, so something was said. If I went by rail, they would tell me what the impact would be—and the same in respect of going by air or driving. That had a profound effect on me and my choices. People make better choices if they have the right information.

Anthony Smith:  Yes, I think they do. I think it helps people make better choices. As I say, I am not convinced about how widespread that level of awareness is. I congratulate you on that level of decision making. For most people there is not a lot of choice, so they take the transport mode that suits what they need to do and, especially with air travel, it is relatively occasional thing for many people.
Many of the rail passengers that we are dealing with use the trains 10 times a week. They know the route better than the train companies, by and large—it is intense and they know, probably, too much about it—whereas air travel is a much more occasional choice.
Any move in that direction is helpful, but I remain unconvinced that it is a major driving force for many people.

Q 111

Gavin Shuker: I am afraid, Mr Smith, that I am going to draw on you and your experience of data in this situation. An issue that came up earlier was that there are obviously a number of things that individual airports will monitor. I gave the example of Heathrow, where, during the period of snow and disruption in 2010, they hit some 90% or 95% of their own targets, but missed on the one big target, which is running an airport successfully.
Do you think that a light-touch form of regulation that does not look at information in individual silos is better, more generally, and would you ask the CAA to adopt that?

Anthony Smith:  I recognise the problem you are outlining, in that sometimes all the indicators are saying that we are succeeding, when you are losing the war, actually, in the front line. I think that is quite common. That is why we concentrate quite ruthlessly on the outputs, in a sense, asking what has happened to passengers.
We have a simple business model. We go and ask passengers what they think, we write it down and we publish it. It is brilliantly untainted by analysis, in a sense. It is very simple: tell us a story and we write it down and we publish it. Of course, it is methodologically much more sound than that, but it is simple. The more you concentrate on the outputs, and the more you concentrate on the outputs in a generalised sense to get people to engage and to answer and, afterwards, to work out why they are saying some of those things—that, for us, has been quite a fruitful approach, because if you are going to engage people in these types of questionnaires, you have to keep it relatively simple.
We have quite long questionnaires, which I am amazed that three out of 10 people fill in. That is astonishing. But people want to give their views, which is great.

Roger Gale: Nigel Mills, last question.

Nigel Mills: Two questions, Chair, if I am allowed.

Roger Gale: Last two questions.

Q 112

Nigel Mills: I always associate Passenger Focus with the rail industry. Do you currently have a role in the air industry and do you think that you should have? Would you like to have such a role?

Anthony Smith:  No, we don’t have a current role in the air sector. We have a role as far as our remit for Britain’s rail passengers and England’s bus, coach and tram passengers extends to getting people to or from the airport by public transport, which we do a little bit of work on, but to be honest not a huge amount.
You will probably be aware that there were some proposals in 2009 that Passenger Focus might take on the representation of air passengers as well, but for various reasons that was not taken forward. If asked, obviously, we would be happy to help. What the Civil Aviation Authority is doing in setting up a consumer panel is a very good start. Hopefully, it will build confidence over time, so that that panel might ultimately be able to have more independence.
What we have learned from the rail sector is that, if you have an independent regulator and an independent consumer body, they do very different things. The regulator’s job is to enforce what people have said they are going do or what they ought to do. The consumer body’s job is to be an advocate. They play very well together, because being a regulator can be quite lonely at times. There is a huge industry that is very well resourced and very articulate and good at advocacy bearing down on your decisions. Sometimes it can be very helpful to have a friend who independently says, “Well, this is what passengers want.” We have no axe to grind; we do not have shares; we do not have interests. All we are interested in is what passengers think.

Q 113

Nigel Mills: I presume what you see from your rail passenger surveys, or parts of them, is complaints about how much it costs to buy food or drink on long train journeys or even at stations. For most rail passengers, you pretty much have a choice: you can bring it from home or it might only be a short journey. For a lot of air passengers, they are not legally allowed to take any drinks through security, so if you have a long flight, you are pretty captive in terms of whatever they want to charge. Do you think there is some need for regulation on the level of charges for passengers once they are in that captive place?

Anthony Smith:  I always worry about the regulation of crisp prices because you think, “Is that really where Government or a regulator ought to be?” It is interesting. You are right. In terms of rail services, catering does not figure at all as an issue. It just does not get anywhere in the top 30 issues, mainly because the quality of the offering at stations has improved so much in the past decade that people have some choice. I do not think I would like to answer that until I have seen some research on the subject about what passengers really think. I must admit that, from my personal experience, not being able to get a glass of water seems like a human right, rather than a consumer right.

Roger Gale: On that note, Mr Smith, if you choose to go away and do some work and send it to the Committee, I sure it would be welcome. I thank you very much indeed for taking the trouble to come this afternoon and for giving us the benefit of your opinions. You are most kind.

Examination of Witnesses

John Moloney and Jim McAuslan gave evidence.

Q 114

Roger Gale: Good afternoon, gentlemen. Thank you for joining us. Would you like to identify yourselves, please?

Jim McAuslan:  My name is Jim McAuslan from the British Airline Pilots Association.

John Moloney:  My name is John Moloney representing the Public and Commercial Services Union.

Q 115

Theresa Villiers: I would like to start with a very general question about your thoughts on the potential advantages of combining security and safety functions in the same regulator, and how best we can ensure a smooth transition between responsibilities from the DFT to the CAA in relation to the security functions in the Bill.

John Moloney:  Thank you for the question, Minister. The PCS is obviously opposed to transfer because we think that it will not deliver what is claimed in terms of combining safety and security—that they are compatible and therefore combining them together will produce a better outcome. Security is a very distinct stand-alone operation that is properly integral to the Department for Transport. As you know, Minister, obviously much better than I do, the Bill proposes that Ministers would retain security policy, whereas the CAA would carry out the operations and instructions of the Department for Transport. That split will lead to organisational problems and miscommunications about what is the exact dividing line.
In the longer term, you mentioned how transfer could be smoothed. We have certainly raised the concerns of our members. At the moment, they have not the faintest idea about their terms and conditions in the CAA. They do not know about their pensions or whether their redundancy moneys will transfer. Obviously, for them, as individuals, that is vitally important. There is a cadre of very experienced security inspectors who are now thinking, “Should we remain in this field, or should we seek employment elsewhere in the Department or the wider civil service?”
As you know, there is a long run-in to the transfer, which probably will not happen until April 2014. Bluntly, those security inspectors have a long time to vote with their feet. What they say to us—this is why we are here—is that, in principle, they think there are lots of problems with the proposed transfers. If, however, it is the will of Parliament that that transfer takes place, they would like it to be on a voluntary basis. If that is not possible, they are looking for assurances on their terms and conditions, the key one being pensions, and redundancies.
It looks as though it is very likely that, under the transfer scheme as it is drafted in the Bill, those security inspectors’ redundancy rights would not transfer. We have people here with 20 or 30 years of service. If your redundancy rights do not transfer, you automatically revert to the statutory minimum. For a lot of people with a lot of years, that is a very daunting prospect.
We also have a number of people—I will finish on this—who are very close to retirement age. The thought of trying to start your career again in a completely different organisation with a different pension scheme may seem a parochial concern, but, on an individual basis, it is important and looms large.
To summarise, we do not think it is a good idea, but, if it did happen, it should be on a voluntary basis with proper safeguarding of people’s terms and conditions on transfer.

Jim McAuslan:  There is sense in what is being proposed, but will it work in practice? Our concern, which runs through our submission, is that the CAA has responsibility for air safety, economic regulation, airspace regulation, consumer protection, environmental protection and, now, airport security.
In that bundle of responsibilities, our concern is that the safety aspect is going to get squeezed out and that this regulatory body, the CAA, cannot serve all those masters at once. For the end consumer, we can see the sense of this, but, in terms of how it is regulated, we are concerned that it will dilute the focus of the CAA on safety regulation.

Q 116

Theresa Villiers: I want to come back on one point. I am keen to hear whether you could expand on your concerns about safety being squeezed out, because, obviously, there are other sectors where economic regulation and safety are combined—in the rail industry, for example. I draw reassurance from the fact that the CAA’s reputation as a safety regulator is almost unparalleled in the world. The CAA is one of the world’s leading safety regulators and is highly successful. I am not convinced that an additional responsibility will compromise that very strong track record, so it would be useful if you could expand on why you think it might.

Jim McAuslan:  I have a huge regard for individual members of the CAA. I do not think that any one individual would do anything that would jeopardise air safety, but, taken as a whole, the way in which the CAA is developing as a regulatory body will cause things to be squeezed out.
When you look at the structure of the CAA’s board, there is no one with current commercial pilot experience influencing the way in which the body operates. When we asked our members in our most recent survey last September, 51% believed that the decisions of the CAA were too influenced by the airlines. I think that individuals perform a terrific job and have very high ethics and values, but, culturally, a problem is developing in the CAA because it is trying to serve too many masters. Too many people are perhaps taking safety for granted, rather than saying, “Well, it should continue to be the focus.”

John Moloney:  I think we should step back slightly. The security arrangements in the Department for Transport are partly based on the experience of the Lockerbie atrocity. After Lockerbie, a dedicated security organisation called TRANSEC was set up inside the Department for Transport. Unfortunately, TRANSEC has now been abolished, but the key point was that it recognised the potential tension between security and commercial interests in that, clearly, a security consideration might be to stop an airport or to restrict movement, whereas there is a commercial imperative to keep passengers and flights going, et cetera.
That slight tension exists now in the Department for Transport, because security is housed in the same division or directorate that is responsible for facilitating transport, and we think that will be exacerbated if it is put in with the CAA. It will just be a tiny strand in a huge organisation. We are talking about 90 people transferring, who have responsibility for security inspections around the country, to an organisation of several thousand. I think the fears that BALPA has about it being swamped or being a very small subdivision of a subdivision are correct, and will actually happen.

Q 117

Henry Smith: The Bill talks about the possibility of inter-terminal competition within an airport. I would be grateful for your views on whether that would be an advantage for passengers, or whether it will cause problems.

Jim McAuslan:  For the average individual pilot at present, in terms of security—I am not able to talk about economic competition between terminals, but I can discuss our experience with security—it is a mess. We surveyed our members and only one in 10 believed that the current arrangements were satisfactory. Some 58% believed that they arrive at the aircraft more stressed having gone through security under the existing regime, so we find security arrangements at airports quite anarchic.
If competition will drive an airport to try to improve its processes, that is terrific, but our experience on a day-to-day basis is that that is not what happens. People make up their own rules at security and, forgive me, you get little Hitlers emerging who are going to give instructions. Our members find it particularly frustrating that they cannot predict that; I say that not in the sense of predicting a way to get round it, but in terms of predicting it and knowing what the process will be between different terminals. That is why we are concerned that the delegation of powers to airports—which is the consequence of delegating powers to the CAA for security, with this outcomes-based security arrangement—will cause a more anarchic situation on the ground, and even more frustration for pilots.

John Moloney:  The PCS’s concern is specifically around the transfer of security functions. Like BALPA, we are worried about the potential change in the regime for safety testing, which we think will deliver variable testing across both the network and airports. Clearly, if, as part of inter-airport or inter-terminal competition, there is variable security—almost like a cost advantage between one terminal and another—we think that would be a problem.
As for the more general position on whether there should be inter-terminal competition, we are neutral. Our key concern is about the potential effect on security. As I said, the DFT has consulted on changing the safety regime. We think that would be a mistake, because it would literally institutionalise the variability of security across the network.

Q 118

John Woodcock: That leads into my question, actually. One proposal that has been put to the Minister is that you would not have a transfer until you had that risk-based approach to security. Can you expand a little more about what you think that would mean in practice, and the implications that could flow from it?

John Moloney:  Our appreciation of the potential new regime is, as I said, that there would be institutionalised variability. As we understand the proposal, as it has been explained to the security inspectors, each part of the airline network would carry out its own risk assessment.
Although there would be a bedrock of EU regulations on which you would have to rest your security arrangements—though my understanding is that the Government are seeking to get an agreement in Europe potentially to change that position—in that situation, you would have an EU basic regulation and then, as far as we can see, a variable regime on top of that. At the moment, you have EU core regulations and then a uniform regulation applying to every airport, every airline and so on.
The variation, as we understand the outcomes-based regime, is based on an individual assessment of what you think the risks to you are. We think that there is a problem with that. If you were in Scotland, for instance, you might say, “We have no international links, so the risk of a terrorist incident in our airport is much lower than, for example, for Heathrow, which is a huge hub. We will therefore have a different security arrangement or lesser security arrangements than we have now.”
The problem we have is that our enemies clearly do not think, “Heathrow is a hard target and Scotland is a soft target, so I will not go for Scotland.” Unfortunately, they are constantly probing all our security arrangements, all the time. There are constant threats. If we have variable security—that is our understanding of what the new proposals are designed to produce—we will produce soft spots in the network. Where we have a soft spot, somebody might probe it, so we think that it is not a very good idea.
It would also change the nature of the inspectors from inspect and direct, which is what we do now. That is physically getting on the floor, seeing what is happening and, if you see something wrong, getting it changed, and, if it is serious enough, getting it stopped. Inspectors would become auditors of paperwork, because one of the key roles of inspectors under the proposed new regime will be literally to look at paperwork. As far as we understand it—obviously, it could be much more sophisticated than we have been led to understand—it will be that, provided the paperwork was all right, the assumption is that the security is all right.
In my members’ experience, that is not true. You have to have eyeballs on the ground. It does not matter what the reputation of an organisation is, human beings are variable, things change and people come under pressure. Without people constantly probing and checking, our worry is that moving to a paper-based system will lose the advantages of having eyes on the ground and constant pressure on organisations to maintain a uniform safety standard.

Jim McAuslan:  If I may, this comes at the same time as two other developments on safety management systems within the airline industry. It is a major shift in how airline regulation is undertaken that we have a move towards safety management systems; we have a move towards fatigue risk management systems, which is a way of managing fatigue differently from set regulations; and now we have outcomes-based security as well, which is basically a security management system, but done with a light touch.
Our concern is whether, culturally, the industry is capable of taking on this light touch. It is one where we have too often seen experiences where the light touch has meant people saying, “Well, we can ignore this and we can ignore that.” The industry has a history of relying on hard numbers, hard details and hard processes, which are applied and then audited. For us, the jury is out on whether another delegation of regulatory power through a security management system can be digested at the same time as the delegation of safety management systems and fatigue risk management systems.

Q 119

John Woodcock: Why do you not accept the Civil Aviation Authority’s claim, which is that a similar risk-based approach is working okay in the safety arena?

Jim McAuslan:  We do not think that it is at present.

Q 120

John Woodcock: Can you expand on that?

Jim McAuslan:  Take, for example, the issue of fatigue. We asked our members whether they would feel comfortable reporting a fatigue incident to their airline. Some 51% of pilots said that they were comfortable reporting to their chief executive officer that they were fatigued.
We do not believe that there is, however good or however big the airline is, an open safety management culture inside airlines. When you look at accident investigations that have been carried out over a number of years—look at the reports carried out by Charles Haddon-Cave into a range of major accidents—you will find that it is the lack of openness in the culture that has been the driving force behind them. There has not been a just culture within the airlines. People do not file reports and they do not say they are fatigued, because they are fearful that by so doing they might put themselves in jeopardy. We have evidence, which I can supply to the Committee if it so wishes, as to where we think the culture is wrong at present.

Q 121

Jim Fitzpatrick: Both your submissions correctly focus on the impacts on your members, which is entirely logical. Having had a chance to look at the Bill, do you or your members have any views on, or welcome, its other aspects? Mr McAuslan, from my time at the Department for Transport, I remember your statistic about 58% of pilots going through security and feeling more stressed by the time they reach the plane. Will you expand on why pilots feel that going through routine security gives them additional difficulty and causes greater stress?

Jim McAuslan:  It is happening because they feel that they are not being treated with the responsibility that they believe they carry: 85% believe that the airport does not take notice of who they are, that it does not listen to them, and only 28% trust airports to make sensible decisions about security.
I do not know how Members of Parliament arrive at security. You have a pass, which acknowledges that you are a trusted person who can navigate without any undue queue. It is not the same with pilots. Even though they have a pass and are about to be put in charge an aircraft, they are, nevertheless, made to do exactly the same as a passenger. Nail clippers are taken off them even though they will sit on the flight deck with a crash axe next to them. The whole atmosphere is of pilots feeling that they are not trusted to make decisions, so they do not feel that they are respected. I am sorry—what was the first part of your question?

Q 122

Jim Fitzpatrick: Do you have any general views on the Bill now that you have had a chance to look at it, given that you are a professional in the industry with great experience?

Jim McAuslan:  The issue for us is the way in which the CAA operates and the various masters it must serve. We are concerned that if it is to take on more responsibility, it will lose focus on safety. You talk about the Bill’s main aim being the end user. We agree, but we do not see the end user purely in economic terms; we see the end user as an egg that must be carried safely from one place to the other. That is the role of our members, which is why I pick you up on the view that we are doing this on their behalf. We are doing this very much on behalf of the travelling public, to ensure that we can transfer them safely. If we saw the end user in economic terms, we would lose our focus on the end user as a human being to be carried safely from A to B.

Q 123

Julie Hilling: I want to pick up on a particular area of concern that I raised this morning. When you gave evidence to the Transport Committee, you talked about the risk of losing expertise in security. In your evidence today, you have referred to potential secondments, rather than total transfers of staff. Does that happen anywhere else in the civil service in relation to other bodies? Do people ever remain employed by the civil service while being managed by another body, with the cost head then going to that other body, too?

John Moloney:  It is incredibly common. Every department has people on secondment to other departments, other public bodies or commercial organisations. Every department will have a transfer team whose sole job is to handle secondments. In other words, it is so regularised and routine that you must have dedicated people in each agency to do it, so in concept and practice, it would be easy to do.
Can I go back to safety versus security, because the PCS has a particular line on an interesting point that was made, which may be of interest? On the difference between safety and security, there is an implicit assumption that everyone wants to be safe. Although you find people who make mistakes, generally, people want to be safe and follow safety routines. The problem with security is that it is designed to stop people who literally want to do you harm. That is why you cannot superimpose one system on to another. One is based on the implicit assumption that people want to be safe and follow rules, whereas the other is based on an explicit assumption that people—well financed in some cases, certainly dedicated—want to do us harm.

Q 124

Gavin Shuker: I want to pick up on some of the uncertainty that the legislative changes create for the industry. Mr Moloney, you are obviously concerned about your members. Do you have an expectation that by changing these different roles, some of your members will lose their jobs?

John Moloney:  The current proposal is that everybody who is around at the time—that is the important point—will transfer en masse under the transfer scheme proposed in the Bill, so in theory, nobody will lose their job. However, there is a worry about our administrative staff. At the moment we have security inspectors. There is a core of policy makers who draft various regulations that people then use and implement. There is also a small admin team of people who deal with travel assistance and so on. The CAA is thinking of moving out of London, as far as we can see. So what happens to all the London-based staff? The inspectors are mobile across the whole country, so it is no problem for them. In essence, their home base is their home. There is a potential threat that they will lose their jobs because the CAA will say, “We’ve got our own administrative staff. As for the policy makers, can you all move to Heathrow or Gatwick because that is our main area of operations?” People will probably say no, and so will lose out.
As I said, the security inspectors and everybody else will move en masse but, as we flagged up in our evidence, our real worry is that with such a long lead-in there is a clear possibility that people will lose redundancy money. In other words, it is not contractual. In those circumstances people will try desperately to get out before the transfer. They have two years to do it. So the current cadre of dedicated, experienced people could be denuded and people nearing retirement might decide to take early retirement, rather than take a risk. So it is a complex picture, but I hope that has answered your question.

Q 125

Gavin Shuker: Obviously, there is a shift from the public purse on to the industry in terms of the cost of these reforms. Does that add to any sense of uncertainty? Do you feel that the industry itself might put a downward pressure on the amount of money it gives which perhaps the Government might not?

John Moloney:  The Bill Committee will obviously have to consider whether the “user pays” principle should apply in this instance. Clearly, it is an added cost. It may be relatively low, but obviously if you are a budget airline every cost will be argued about. We think that the main driver for transferring work from the Department for Transport to the CAA is that the CAA can charge. It is almost as though the DFT looked around to see what body it could transfer the work to, so that it can be charged for. We do not think you should base your security principles on whether you can find a convenient accountancy system to plug in, so that you can charge. If you want the Department to charge for something, let it charge. We think that the main driver is this: the CAA levies charges already; you need to levy an extra charge for security, so why not put it with the CAA, which can easily accomplish that extra security levy in accountancy terms?

Jim McAuslan:  The CAA’s responsibility is to ensure that British airlines provide air transport services that satisfy all substantial categories of demand at the lowest possible cost, with a high degree of safety and ensuring efficient delivery of business. But you have to look at the meaning of those words and how “lowest cost” and “high standard of safety” tie together. When people are making decisions, what gives? This is the theme we have developed in our paper about the culture within the industry at present. Who is paying? Who will call the tune? Where will those decisions be taken? That is our concern and why we think there should be a focus, perhaps by splitting the regulator or, as has been suggested elsewhere in the context of economic efficiency, by having the NAO audit the CAA. Perhaps the Health and Safety Executive should monitor and audit the safety standards of the industry.

Q 126

Mike Freer: The budget airlines would counter that by saying that their record on passenger safety is better than some of the more established airlines’, even though they have driven down costs considerably. Is it always true that purely a downward pressure on costs leads to a weakening on passenger safety?

Jim McAuslan:  No, I think that a lot will depend on the culture of the airline and how effective it is. Throughout the world, where global accidents have happened it has clearly been because the culture has been got wrong and things have been glossed over. The Colgan accident, which happened three years ago last week, occurred because corners were being cut. In that case, fatigue was an issue, but it is not always fatigue.
We would contend that being low-cost does not mean you are unsafe. Each airline must be looked at on a case-by-case basis, but we would contend that certain standards have to be maintained. What happened in the UK over the past few years to give us the high safety standards is that a set of regulations has evolved through science, medical evidence and experience. Why throw those out—there has not been an accident, therefore things must be safe—and then run the risk? Why not codify and keep them, which is what we argue elsewhere with the fatigue rules, rather than just saying that it has not happened?
In looking at a low-cost airline, there are questions we would raise about how effectively that airline is regulated, because it is operating across a number of countries through various jurisdictions, with no obvious link with any national regulator that can keep control, so a lot will hinge on how effectively that airline operates. The history of the merchant navy was one of, “Do we have to regulate?”, and we saw the emergence of flags of convenience and what happened there. The way in which safety standards dropped in the merchant navy became a real concern. I do not think we should do this lightly, which is why our contention with the Bill is that Parliament needs to think about giving more responsibility and diluting even further the focus of the CAA.

Roger Gale: Any further questions. No? In that case, that brings us to the end of the session. Thank you very much for joining us this afternoon, Mr McAuslan and Mr Moloney. We are grateful to you.

Examination of Witness

Dr Humphreys gave evidence.

Q 127

Roger Gale: Good afternoon, Dr Humphreys. Please identify yourself for the record.

Dr Humphreys:  I am Barry Humphreys. I am non-executive chairman of the British Air Transport Association.

Q 128

Theresa Villiers: I am of course acutely aware that the appeals process has been a matter of strong focus by the airlines. Would you agree that the Bill gives airlines a much more effective appeal right than the judicial review, which is the only option available to you under the current regulatory regime?

Dr Humphreys:  As you know, that was an issue that the airlines placed a great deal of importance on, and we engaged with your Department over many months discussing the issues involved. I certainly agree that giving the airlines a right of appeal, along with the airports, presents a much more evenly balanced regulatory package and will produce benefits for everyone, including the regulator, but especially the passenger.
As you know, there was concern at one stage—I think you yourself expressed it to me—that giving airlines the right of appeal would result in frivolous and vexatious appeals. We went to a great deal of trouble to address that issue. We employed specialists in regulatory law, and with your officials we went through all the possible problems that might arise, and we came up with a model that we think more or less guarantees that there will not be such vexatious appeals, so we are very happy with the way the Bill has turned out.

Q 129

Theresa Villiers: That was indeed very useful input, without which we could not have come up with the package that is now in the Bill.
I am sure that the Committee would be interested to hear your views on some of the environmental issues that we have been discussing during our early sittings. Could you explain why your membership does not feel it necessary to include an environmental duty for the CAA in relation to economic regulation?

Dr Humphreys:  It is not that we think the environment is not important—it absolutely is. We very much recognise that if the industry is to be allowed to grow, the environmental impact has to be addressed. However, we do not think the Bill is the right place to insert new environmental requirements on the CAA. There are already a number of opportunities for the CAA to exert influence on environmental matters. May I give you a couple of examples? In the last few weeks, the CAA has published two documents: one is entitled “Aviation Policy for the Environment”, and the other concerns a consultation on the CAA and the environment. That document lists at great length all the areas in which the CAA is already involved in the environment. It just is not necessary, in our view, for additional duties to be placed on the CAA.
In addition, we are concerned that a Bill that is essentially related to airport regulation and the new role for the CAA is not the right place for environmental duties to be imposed. Many environmental requirements are policy issues that should rightly be the responsibility of the Government, not an independent regulator.

Q 130

Roger Gale: Dr Humphreys, you have referred to a document, which you are entitled to do. If you would like to make it available to the Committee, we will ensure that members have sight of it, if that would be helpful to you.

Dr Humphreys:  I am happy to do that, Chairman.

Q 131

Jim Fitzpatrick: Dr Humphreys, most people who have sat in that chair over the past day and a half have disagreed with your organisation’s view on a secondary duty in relation to the airlines. You will have heard the arguments why such a duty is not considered necessary in the Bill, and it is not included in the Bill. Would you like to articulate why your organisation still believes that it ought to be?

Dr Humphreys:  First, we believe that the CAA should have a primary duty to look after the interests not only of the passenger, but of the airlines, in relation to airport regulation. We have pursued that argument at great length—and I think we have probably lost it. Nevertheless, that is our preferred option.
The reason why airlines are so central to airport regulation is that they are the prime customers of airports. I understand that the passenger, of course, is a customer as well, but we are dealing here with airport regulation. This is a five-year cycle that is extremely complex, very time consuming and very expensive. It is a process that individual passengers, with the best will in the world, are just not able to participate in. Indeed, even passenger representative groups have told us repeatedly that it is not something they either want or are able to participate in. You are dealing with matters such as the cost of capital, baggage systems, investment in terminals and capacity. These are technical, complex issues that realistically only the airlines and the airports are in a position to deal with. We think it extremely important that the CAA take notice of the key role the airlines play.
The Department for Transport argues that there are numerous places in the Bill where the CAA is required to consult the airlines. We welcome that and have no doubt at all that it will consult us, but in our opinion being consulted and there being a duty to take account of your views are two quite different things. We believe that having at least a secondary duty for the CAA to take account of our interests would improve the quality of the CAA’s decision making, to the benefit of the ultimate consumer.

Q 132

Jim Fitzpatrick: You mentioned terminals. I do not see any reference to the proposal for inter-terminal competition in future, mentioned and provided for or dealt with in the Bill. Do you have a view on inter-terminal competition?

Dr Humphreys:  The Bill provides for such competition; it does not enforce it in any way. We think it is a good idea to provide for it, in case it becomes an issue in future. In my previous role, before I retired as a director of Virgin Atlantic Airways, we frequently argued that Virgin benefited considerably from inter-terminal competition at Kennedy airport, for example, where it was possible to transfer between terminals, have better service and lower costs. That was absolutely impossible at Heathrow, for example, where the approach was “take it or leave it”, to put it bluntly.
However, the likelihood of getting into terminal competition in the near future is zero, because, in order to have it, you need spare capacity. At the moment, Heathrow may be a single monopoly; if you had different companies operating each of the terminals, you would just have five monopolies instead of one. It would not really take you much further. Who knows what might happen in future? There may well be at some airports more spare capacity between the terminals. It is something that might be worth taking into account.

Q 133

Jim Fitzpatrick: One witness this week also referred to JFK and said it was one of the most expensive airports in the world. I take it that the Virgin terminal was the market leader in efficiency and cost.

Dr Humphreys:  I am not really here to appear on behalf of Virgin alone. Our experience was that the quality of the service that we received there was superior to what we got at our home base in London.

Q 134

Mike Freer: Representing the airlines, your clients or your organisation will spend a great deal of money cosseting the passenger for most of their journey. However, for the last, say, 10% of their journey, when they are dumped in the arrivals hall, all that customer experience work can be unravelled. In the Bill, there is a duty on publication of information. Do you have a view on whether that duty should be extended, say, to the customer service operated by UKBA?

Dr Humphreys:  I think that would be a very good idea. If I might expand on that slightly: airlines have been concerned about the border agency, both UKBA and its predecessor, for many years. We have not been—to put it bluntly—impressed by the management of the organisation. You will have to excuse me, because I flew back from India only last night. I know there have been changes to the UKBA.

Mike Freer: You have only just got through passport control.

Dr Humphreys:  I just flew through it actually; I have not always done that. I know there have been changes, but my impression is that they have not addressed the core problems that our members face. That is that there are times when foreign visitors to this country can queue for three hours. UK citizens can queue for an hour to get into their own country. We think that is totally unacceptable.
I understand that UKBA has an objective of 45 minutes. That can be a long time if you have just come off a flight of several hours with young children and so forth. It seems to us that there is room for a fundamental review of the whole approach of border security. When you get a situation where, when the staff go on strike, the queues disappear, and civil servants can be trained in under two days to do the job, it raises some fundamental questions about what is going on there. We would welcome that review.

Q 135

Mike Freer: I didn’t particularly want to open the can of worms about UK border security. I was thinking about the publication of information about queue times and maybe even staffing levels. Do you think that would be a helpful step?

Dr Humphreys:  Absolutely. The more information available in that area, the better.

Q 136

Julie Hilling: I wonder whether you can help me; I am trying to be clear about what the Bill does or does not do. In your evidence, you said:
“These failings have resulted in excessive price increases and poor quality service at regulated airports.”
Could you help me by identifying the failings that did that?

Dr Humphreys:  Well, that is not only the view of the airlines; the Competition Commission was also critical of the approach taken by the CAA over the last 10 years or so. Fundamentally, the problem we saw was that it was not strong enough in addressing the problems that the airports had and allowed the airports to get away with more than they should have done. So the quality of service, in terms of investment, which translates into facilities for airlines and passengers, was not good enough and they were allowed to have price increases that were quite excessive in many cases. Can I give you an example?
In the last review, when BAA still had control of Gatwick, the CAA approved an investment programme for Gatwick, despite the fact that the airlines said that really was not a suitable investment programme that did not meet the needs of the customers of the airport. When BAA sold Gatwick, the new owners produced a revised plan, much closer to what the airlines had originally said; it involved less absolute investment, but was more focused on what was needed. If you go to Gatwick today, I think you will see quite a significant improvement in the quality of service provided there.
We have been critical of the CAA. That was the former management of the CAA; there have been many changes there now, and we are more impressed with the current people there.

Q 137

Julie Hilling: Do you think the Bill will resolve those issues?

Dr Humphreys:It will go towards resolving them, certainly. It will help quite significantly.

Q 138

Julie Hilling: But if you remain outside that, will that still be effective?

Dr Humphreys:We will never remain outside it. We are core to it, because a great deal of our money is involved in airport charges. Are you referring to the right of appeal?

Q 139

Julie Hilling: The bit that you have been saying about the secondary duty.

Dr Humphreys:The secondary duty. It would just make the quality of the decision making better if the CAA had to take account of what are, after all, the prime customers of the airports.

Q 140

Julie Hilling: I am just trying to get my head around whether you think that that would still happen if you are not part of the secondary duty. Why is this Bill going to solve the problems?

Dr Humphreys:I understand your difficulty with this. It is not a black and white issue; it is a question of degree. All we are saying is that it is more likely to happen if the airlines are given a secondary duty.

Roger Gale: Any further questions?

Q 141

John Woodcock: Can you give any examples of ways in which you think that consumers could be ultimately helped by giving airlines a secondary duty? You stated it, but I wonder if—

Dr Humphreys:That is a difficult question.

Q 142

John Woodcock: You mentioned decisions on baggage handling, for example.

Dr Humphreys: The airlines will be consulted in this process—there is no question about that—but it is a question of how much weight the CAA will be expected to give to certain stakeholders’ views. Clearly, it will give considerable weight to the passenger, which is quite right under its primary duty, but if it does not have this secondary duty and is only required to consult, then we are concerned that our fundamental interests will not receive the weight that they ought to.
I am sorry that that is a very vague answer, but it is not an area that it is possible to be absolutely precise about, I don’t think.

Q 143

John Woodcock: Do you think that consumers currently understand whether they are financially protected in the event of collapse?

Dr Humphreys:  Are you talking about ATOL?

John Woodcock: Yes.

Dr Humphreys:  I must say that I find it difficult to comment on ATOL, because our members are absolutely split down the middle.

Q 144

John Woodcock: That gives you the freedom to tell us what you personally think.

Dr Humphreys:  Not if I want to be chairman of BATA tomorrow, so if you do not mind, I will not comment.

Q 145

Nigel Mills: You will be aware that some smaller airports have concerns about some of the additional costs that the Bill will provide. They will struggle to pass them on to the airlines. Do you have any comments about that concern? Do you think it really will be a problem?

Dr Humphreys:  If I understand it correctly, their concern is mainly about data collection and information provision, and that does concern us, because the Bill will also potentially require airlines to provide more information.
It is important to remember that there are no free lunches when it comes to regulation; regulation comes with a price attached that must eventually be passed on to someone. That is why it is a good idea that the CAA should have powers to collect information, but it should be careful about using those powers and use them only when there is clear evidence of market failure and when value can be added by collecting and publishing the data. An analysis is necessary in every case. Does that answer your question?

Q 146

Nigel Mills: Yes. As a second question, how many UK airports do your members think need economic regulation?

Dr Humphreys:  We think that the three airports that are currently economically regulated should continue to be so, because they all exert economic power.

Q 147

Nigel Mills: Even after Stansted is sold by BAA?

Dr Humphreys:  Who knows what will happen in the future? It depends on who the new owner is and what they do with their investment. We have seen a new owner come in at Gatwick, and, as I said, our members have been relatively pleased with what has happened so far. They think the new owner is doing a better job than BAA did before.
However, Gatwick still has monopoly power in our opinion, and whether it has will be determined by the CAA. It will do an economic analysis, we will contribute, and it will come to its conclusion. From our perspective, Gatwick certainly still has economic power and can therefore adversely affect the interests of consumers.

Q 148

Nigel Mills: One final question, if I may, Mr Chairman. Most of us would agree that competition has driven many more routes from many more airports than I can remember there being 10 or 15 years ago. There is a concern that some of the regional routes into Heathrow may be under threat, especially following a recent change of ownership. Do you have any thoughts on whether there is any need for the Government to be involved in ensuring that links from, say, Belfast and Scotland into Heathrow, are maintained going forward?

Dr Humphreys:  Our position would be that the only way of guaranteeing access from the regions into Heathrow is to ensure that there is the capacity at Heathrow to provide those services. I am afraid that any other approach is not likely to be successful in the long term.

Q 149

Seema Malhotra: If I understood you correctly, you were fairly clear at the beginning of your evidence that there should not be any further environmental duties in the Bill. Do you think there needs to be anything in there that recognises the impact, of noise particularly, on local residents around an airport?

Dr Humphreys:  I certainly think that that should be taken into consideration, but not necessarily in the context of the Bill. There are already numerous provisions for taking account of environmental impact, whether that be noise or emissions or whatever. My point was that I just do not think that you need anything else in the Bill. If you do put something in the Bill, there is a danger that it will create unforeseen outcomes that may not be welcome.

Q 150

Seema Malhotra: Could you elaborate on those?

Dr Humphreys:  They are unforeseen, so I do not know what they would be, but there could be conflicts and so forth. As there is so much legislation and regulation already available, I do not think it is necessary to put any more in the Bill.

Q 151

Mike Freer: Following up on the, if you like, unforeseen foreseeable, are you saying that if noise became part of the regulatory framework and the environmental package, it could hasten the demise of Heathrow and give further impetus to a new airport in, say, the Thames estuary? I apologise if I have drifted slightly, but I think it is always important, when we discuss tightening up or adding new regulations, that we look at all the potential impacts it might have.

Dr Humphreys:  That is not what I was saying, no, although it may well be the case. There are already rules in place, and I believe the Department for Transport will soon be consulting on, for example, night flights, which are a particular issue, so I am not sure the Bill would make that much difference.

Q 152

Mike Freer: May I follow through on that?

Roger Gale: You can try.

Mike Freer: Allowing that there may well be existing rules, and assuming that the CAA starts to flex its muscles on noise abatement and environmental matters, if you follow the logic, surely that might make Heathrow environmentally unsustainable on whatever grounds, which would then hasten the argument for another airport. I am asking not that you agree that we should have another airport, but whether my logic is correct in that it could flow through Heathrow’s becoming environmentally unsustainable.

Dr Humphreys:  I suppose, theoretically, you could mount a case, but I think it would be a challenge. There are already such powerful restrictions on operating into Heathrow that I cannot envisage many more being imposed. Remember that the previous Government, when they approved a third runway, laid down as a condition very severe restrictions that had to be met before that runway could be operated. The powers are already there to do whatever you want to do on the environment around Heathrow.

Q 153

Julie Hilling: I want to pick up on the ATOL stuff. I will have one little try to see whether you can expand on that. What are the reasons for some of your members’ belief that airlines should be brought into ATOL? Why do others think they should not be brought into ATOL?

Dr Humphreys:  Some of our members are part of large tour operators, such as Thomas Cook or TUI, and they tend to view the matter very much from the perspective of the tour operator. I am sure ABTA will explain that view later. On the other hand, we have airlines such as British Airways, Virgin or bmi that have only very small tour operator groups and are purely focused on the airline side of things. They take a very different view on whether airlines should have additional restrictions imposed on them. So the airlines are split down the middle, I am afraid, and there is no common ground between them.

Q 154

Julie Hilling: Do they justify that on competition grounds? Most of us think that if it looks like a package and feels like a package, it should be a package, although we then discover that, if we are stranded somewhere or parts of our holiday collapse, it is not a package. Can they justify in any way why they feel they should be outside?

Dr Humphreys:  I am sure they can justify it, but they have not briefed me. I would love to give you my personal view, but I am here as chairman of BATA, and BATA does not have a view on that. I am sorry.

Q 155

Gavin Shuker: At the moment, the CAA has the ability to enforce fines where there have been contraventions of licences. In BATA’s view, how well do you feel the CAA has done as custodian of that power so far?

Dr Humphreys:  I think the CAA has done a very good job. This applies mainly to the safety side, of course, and I heard some of the evidence given by your previous witnesses, which I did not recognise.
I think we have a superb safety record in aviation. It really is quite incredible when you think that there are thousands of metal tubes flying through the air every day. One reason for that record is the co-operation between the regulator and the industry; it has clearly benefited everyone, and the CAA has played a critical role in that. What we are concerned about is that if those powers are expanded, they might become more like policemen, rather than regulators, which would not be welcome. It could have adverse effects on safety.

Q 156

Gavin Shuker: I take that point, and I am also aware that individual airlines will jump up and down and go crazy at periods in which airport operations grind to a halt. What is the best way, in your opinion, in which the CAA can use the powers in the Bill, and those it has more generally, to ensure that airport operators provide the kind of service that end passengers would expect?

Dr Humphreys:  They already have powers under the current law to set certain standards; if those standards are not met, there is a financial penalty for the airport. I would not quite describe that as a fine, although the end result might be similar. Indeed, at the moment, if they exceed those standards, they get more money, so I think the Bill will simply expand on that and make doing that easier.

Q 157

Gavin Shuker: Just to summarise your position, you welcome the provision of financial penalties in the Bill.

Dr Humphreys:  Yes, with the proviso that when applied to safety, it is applied with a light touch, as it has been in the past.

Q 158

Roger Gale: Are there any further questions? Dr Humphreys, is there anything you wish to add?

Dr Humphreys:  I do not think so.

Roger Gale: In that case, thank you very much. You will not mind my saying that you have skated across some fairly hazardous ice very skilfully indeed.

Examination of Witness

Mark Tanzer gave evidence.

Q 159

Roger Gale: Good afternoon. Would you identify yourself please?

Mark Tanzer:  Hello. My name is Mark Tanzer and I am the chief executive of the Association of British Travel Agents.

Roger Gale: Thank you for joining us, Mr Tanzer.

Q 160

Theresa Villiers: Would you explain why ABTA is supportive of moves to extend air travel organisers’ licence protection to more holidays and more consumers?

Mark Tanzer:  I am sorry, the door just shut. Could you repeat the last bit?

Theresa Villiers: It would be good to hear your thoughts on ABTA’s views about proposals to extend ATOL protection to more holidays, and therefore more consumers.

Mark Tanzer:  ABTA is very supportive of that move. We believe that consumer protection for holiday sales is important to both the industry and customers. It is a product that needs those protections. As I am sure the Committee is aware, the traditional model of package holidays, which were protected, has become a shrinking part of the market, which has resulted in a lot of consumer confusion about whether they are covered.
The reality is that a lot of people are travelling without such protections, so we have, through consultation with our members—a lot of whom will be coming into this protection regime for the first time—been pushing for the extension. We are very keen that, as provided for within the Bill, holiday sales by airline are also brought in as soon as possible.

Q 161

Theresa Villiers: Yesterday, in the Select Committee on Transport, I was asked, “Why don’t you just ask consumers to get insurance and sort themselves out?” In your view, what would be the downside of a situation that was entirely dependent on consumers seeking out travel insurance to cover themselves, in relation to insolvency of tour operators or other providers of holidays?

Mark Tanzer:  They will not, is the first point. Unless you make it a statutory obligation like car insurance, our evidence is that people will not take out that additional insurance. If it does go wrong and they are stranded overseas it becomes a problem for the industry, the Government and everyone else. Ultimately, the Government must have a mechanism for repatriating people who have not taken out insurance. Travel insurance policies at the moment cover a huge variety of different things, but they will not typically provide against the failure of your travel organiser.
You would have to have a much bigger pool of proper insurance policies there for the customer to choose from. In the long term, the issue of consumer protection could be handed back to the markets, with a mixture of bonds and insurance policies and so forth, together with the travel organisers. However, I would be sceptical about whether each individual customer, given responsibility for protecting themselves, would actually do that.

Q 162

Theresa Villiers: Obviously, the Bill’s provisions are particularly focused on giving the Government power to bring airlines in at some point in future, if the appropriate impact assessments and so on indicate that that is the right thing to do. What is ABTA’s view on whether airlines should be part of the ATOL scheme?

Mark Tanzer:  We very much believe that they should be. The fact that they are airlines is secondary to the fact that they are selling holidays. A flight and a hotel is a holiday, whether it is sold by an airline, a travel agent or a tour operator. Not having them in the scheme will, first, leave a lot of people outside protection—which we think is a good in itself—and, secondly, will create a competitive imbalance between those who are providing protection and the airline holiday sales, which are not.
That is not an issue for members only in terms of competitiveness; it will have the effect of driving customers towards the unprotected segment. Particularly on the internet, the way in which holidays will be racked up in terms of screens will be the cheapest at the top. Of course, if you are an airline selling holidays and you are not carrying the cost of protection, your holidays will come higher up and you will get a larger share of the market. The perverse result of not having them in will be that even more people will be driven towards that sector, where we do not want them to be.

Q 163

John Woodcock: Presumably, therefore, you would think that this power should be required in the Bill, and not simply enabled by it, with a decision at some later date.

Mark Tanzer:  Yes. We are very pleased to see a provision for the power in the Bill. We would urge, assuming it goes through, the implementation of that at the earliest possible opportunity.

Q 164

Nigel Mills: I agree with the sentiment that what is important is that people booking holidays should clearly know whether they are protected, rather than being in the horrible position where you assume you are but you are not sure.
Do you think this issue is wider than package holidays that involve air flights? Does it not extend to all package holidays, whether you are travelling by coach or something else? I assume you are familiar with Skiing-Europe and the various schools that have issues, which frankly took every reasonable measure to think they were protected by the bonding scheme, only for the insurance company to revoke it. Do you think we should be having a wholesale reform to ensure that all package holidays, whatever the transport that takes you abroad, are properly protected?

Mark Tanzer:  If it is really a package holiday—put together by an organiser and sold at an inclusive price—it is protected, whether it has a flight or not. ABTA is one of the bodies that will protect packages that do not have a flight. We will protect cruises, coaches and everything else. Under the European package travel directive, those customers must have a means of protection. In the UK, we are one of the means by which that is provided.
In Europe at the moment, they are looking at the scope of the package travel directive to see, in the same way that we are proposing to extend ATOL here, whether that should also be extended to include those types of arrangement that are not formally packages, but look like packages.
In Europe, where a lot of the travel arrangements will not include a flight—because people will be getting a train or hiring a car and so forth—it will become more of a travel directive, which would embrace all these kinds of arrangements. So that you are clear, at the moment packages that do not have a flight are protected. We are one of the bodies that do that. The big growth has been in the unprotected air segment.

Q 165

Nigel Mills: Where would you draw the line between what is a package and what is not? If I leave here and go and book a flight on Ryanair, for example, it will offer me an allegedly cheap hotel and car hire at some stage in the booking process.
I might think that I have booked a package if I click that hotel or car hire link, but I suspect that I am just being taken to a new separate non-linked booking with a car hire company or a hotel company. Do you think that all that should be a package, if that is what is happening?

Mark Tanzer:  In respect of the consumer protection, financial protection and repatriation, yes, we do, because the customer does not understand the difference between what is formally a package and what looks like a flight plus a hotel bought through a site or a linked site.
There are some technical challenges in saying, “On a click-through, is that really a linked arrangement, or is that an advertisement for another site?”, but those are not insuperable. The important thing from the customer need point of view, which is the protections of repatriation and what happens if the company goes bust before your holiday, is that it is exactly the same whether it is a package or whether you have bought one of these arrangements. That is why this is an important step forward.

Q 166

Julie Hilling: Why is the scheme currently in deficit? How has that arisen?

Mark Tanzer:  I am probably not the one to comment. This scheme has been administered by the Civil Aviation Authority on behalf of the air travel trust fund. There have been a number of significant failures, which have caused a lot of claims on the fund. The bonding in place has not been sufficient to cover those claims.
Some of that is attributed to this very confusion, where people who had not formally been part of the ATOL scheme had to, none the less, be brought back. It is a conjunction of a series of large failures over a number of years, but it is better to ask the people who have been responsible for setting the security on that than me.

Q 167

Julie Hilling: Could I just clarify—I appreciate that you are saying that you are not 100% certain on this—that your belief is that the deficit is because the fund has had to pay out for currently uncovered repatriations?

Mark Tanzer:  It is a combination, I think. Sometimes, if you simply have not got the right level of security at the time a company goes bust and they have more passengers than you thought and so on, that will put the fund into deficit. It is probably a combination of things. There have been costs associated with bringing people back who were not covered.

Q 168

Julie Hilling: Thank you. I was very surprised to discover when I started to look at all this—I took out my travel insurance and I booked my holiday—that pieces of that would not be covered. Could and should the insurance industry be doing more? Where I am coming from is that people will think that they are insured.

Mark Tanzer:  I am sure that it could. It will not happen overnight, because in so far as you are an insurer underwriting someone’s holiday, in a way you are also underwriting the airline that is carrying them. It is a big task for an underwriter to say, “I will underwrite all these airlines together”, because if they go down, that is what will cause an insurance claim.
I do not think that there is a deep insurance market for that at the moment. The policies where you can buy insurance against airline failure are few and far between and as soon as somebody looks a risk, they are taken off. It is not a deep market for insuring airlines against financial failure and that would underlie consumer protection in this.
Currently, you need some statutory support, because then you can educate the financial markets on how they can make money through providing this protection in the medium term, but it will not happen overnight, which is why the extension of the ATOL scheme is a first step. We then need to look at options on how the regulator can have the regulatory part of that, but the implementation of providing the protection can be done by the markets.

Q 169

Julie Hilling: My understanding is that if people are covered by ATOL, if flight-plus comes in, they will receive a certificate to say that they will be covered. If people are not covered, however, they will not receive anything. Is there anything that you believe could be done to make people aware? It seems to me that part of that is about competition. If you have paid a bit extra for the cover or if you realised that that holiday did not have any cover, you might make some different decisions as well. I just think that people think that they are covered.

Mark Tanzer:  I think it would be hugely helped by a public awareness campaign to tell people that they should be looking out for their certificate when they book a holiday. If they do not get it, they should say, “Where’s my certificate and my protection?” That is different from saying that if people are not providing it, everyone should say, “This holiday is not protected,” which would be laborious. A strong public awareness campaign that makes people want to opt in would be beneficial.
We have been going round the country consulting members about the extension of the ATOL scheme. Far from people saying, “How can I avoid it?”, they are saying, “Can I opt in if it turns out that my arrangements are sold outside the 24-hour period?” Those customers want to be protected, none the less. I would rather build on the positive side and encourage customers to want this, which will drive providers to give it to them.

Q 170

Julie Hilling: My final question is about the 24 hours. Do your members think that that small window is adequate or should it be longer?

Mark Tanzer:  My understanding is that people can opt in if the time period is longer, so it does work. You have to draw the line somewhere, so people will always have an option to go 10 minutes the other side of the limit and avoid the scheme.
In people’s systems, if someone books a hotel and comes back more than 24 hours later for the flight, the challenge is hooking them up and saying, “That’s not only the same customer but they are part of a linked arrangement.” The systems people have said that the proposed time period is doable. Without too much difficulty, you will be able to join up two elements and say, “That is part of a linked holiday.” We are comfortable with that time frame.

Q 171

Julie Hilling: What if it were a week?

Mark Tanzer:  You could do that, but the systems challenge would be bigger. It is harder to tie up—particularly online—over a distance of a week rather than 24-hour bookings that are part of the same arrangement. This time frame will capture the vast majority of holiday sales, either on the high street or through the internet.

Q 172

Pat Glass: When I travelled here on the tube on Monday, I saw an advert for holiday insurance. It was the usual kind—one skiing trip, annual cover—but it referred to volcano dust. I thought, is this the insurance company jumping on a financial bandwagon? The Bill will extend the scheme, but will people still need to take out that kind of insurance?

Mark Tanzer:  We do advise people to take out travel insurance. I am not sure what the volcanic ash cover would have given you, but there are other provisions and obligations on airlines to look after people in the event of a volcano. For lost property, medical care and so on, personal travel insurance will always have a place, but as I said, it does not usually cover against financial failure of your travel provider. A strong, clear regulatory scheme such as ATOL, supplemented by your own personal insurance, is the best that we can suggest in the short term.

Q 173

John Woodcock: The Select Committee advised that passenger welfare plans should be in place to deal with eventualities such as disasters and passengers being stranded. Is that a good idea that has been omitted from the Bill?

Mark Tanzer:  It is a good idea. The responsibilities of package organisers extend to care when a customer is overseas if there is a disaster and so on. Those fairly strong protections have been around for a long time.
The challenge comes with the new arrangements, which are often put together by agents who do not have people on the ground, because they do not have the volume and there is not a package organiser. What sort of liability can they reasonably be expected to have and how will they execute it? Someone might walk into your travel agency and say that they would like to go to a hotel that you do not know. You can put together the arrangement, but if it goes wrong, you have no means on the ground to provide care. One of the things that we are arguing for at the European level is that those responsibilities should be clearly defined between the retailer, the organiser, the tour operator and the destination, to ensure that the customer is protected.

Q 174

Roger Gale: Thank you. Are there any further questions? Mr Tanzer, is there anything that you wish to add?

Mark Tanzer:  No.

Q 175

Roger Gale: Thank you very much for joining us. We are most grateful.

Examination of Witnesses

Theresa Villiers, Robert Catherall and Richard Hatfield gave evidence.

Q 176

Roger Gale: Good afternoon. Minister, for the sake of the Official Report, would you like to identify yourself?

Mrs Villiers:  My name is Theresa Villiers. I am Minister of State for Transport.

Q 177

Roger Gale: Thank you. Would you care to make a brief opening remark?

Mrs Villiers:  I should be delighted to do that. First, I should like to introduce Rob Catherall. He is the regulation policy manager for airport economic regulation. Richard Hatfield is due to join us in a moment, but as we are running so admirably ahead of target, he is on his way.

Q 178

Roger Gale: You are quite right. We are running ahead of schedule. If there are any questions that you feel Mr Hatfield needs to answer that others cannot, then we can park those and come back to them when he arrives.

Mrs Villiers:  That seems a very pragmatic solution. I very much look forward to a lively debate in Committee on the key areas which are already starting to emerge as the points of contention. I hope there will be some consensus over the core goals of the Bill. We have built on some excellent work by the previous Government. We have also drawn on the views of major stakeholders including airports and airlines in coming to the package that we are presenting to Parliament. We believe that a primary duty to passengers will deliver tremendous benefits, and enabling the CAA to intervene in real time, rather than having to wait five years for a blunt instrument of a price review to protect passengers’ interests, will be a major step forward for passengers. We believe airports will benefit from less bureaucracy and lower cost. We believe airlines will benefit because they have much more effective appeal rights under this framework than under the previous system. At its heart I hope that we can command a lot of support for the Bill and I look forward to a debate on the points of contention.

Roger Gale: Perhaps we can start by finding out whether the Opposition agree with you.

Q 179

Jim Fitzpatrick: May I begin by apologising for our low numbers this afternoon? It is no disrespect to the Minister at all. I am sure she realises that, but a number of our colleagues have gone to the cycling debate in Westminster Hall which, as a keen cyclist, she may well want to attend herself.
I can confirm that there is a lot of consensus on many aspects of the Bill. I personally had a briefing from the Minister and her officials before these public sessions were organised. I am grateful for that. I know that one or two other colleagues benefited from that opportunity too. My only question for the Minister is this: has she heard anything in the past few two days that has given her pause for thought and if so can we expect some additional Government amendments? She may still be reflecting on some of the things she has heard, but some witnesses may have given her pause for thought and if so does she want to share that with us?

Mrs Villiers:  We are, of course, always open to the proposals made to refine the Bill. There is a technical amendment that we may propose to the Committee, which would insert “the Bill” into one clause. I am not sure I remember which.

Robert Catherall:  It is clause 107.

Mrs Villiers:  Apart from that, we do not have plans at present to introduce amendments in Committee, but, as I said, we will listen to what hon. Members have to say. If there are parts of the Bill that we can refine and improve as a result of the parliamentary scrutiny process, we will not hesitate to do that.

Q 180

Mike Freer: May I suggest an amendment, Minister?

Mrs Villiers:  I know what’s coming.

Q 181

Mike Freer: You have heard me raise with numerous witnesses that the scope of the clause on the publication of information should include the performance of UKBA. I appreciate that that is a Home Office function, so I stress that the amendment would need to be carefully worded on publication of information that affects the air passenger user. Basically, BAA, Gatwick and Passenger Focus would support it, and even the CAA and BATA said that they would support that particular provision being extended. Provided we could get the wording correct, what is your view on extending that scope?

Mrs Villiers:  As you know, I cannot agree with you that this is the appropriate vehicle to impose transparency requirements on UKBA, but we are in agreement on the overall benefits of transparency. Indeed, across Government we have a commitment to introduce a more transparent approach. Following on from the points made on Second Reading, I met with the Immigration Minister, my hon. Friend the Member for Ashford (Damian Green) to discuss this matter. You will appreciate that the DfT and the Home Office are in regular dialogue over UKBA because of the overlap. UKBA reports to the Home Office of course, but it does have an impact on the performance of our airports. My hon. Friend made it clear that he is prepared to look at these matters again to see if more transparency is possible, and, in particular, he is prepared to consider whether it is possible for more port-by-port based information to be published, but that would be a voluntary arrangement and would not be part of the formal framework provided by the Bill.

Q 182

Nigel Mills: May I continue down that line? On the data that the Bill will enable passengers to receive and understand, a key thing that I want to know is how long it will take from the plane reaching the gate to my being able to get on my way home. In many ways, if the UK Border Agency queue is slow, my bags will be waiting for me, but if the border agency queue is fast, I will have to wait for my bags. Will it not be a bit of nonsense to have that information, if I do not have information on the thing that probably delays me the most on my arrival?
Are not the airports the best placed people to know the time it takes from when a plane hits the gate and the doors open to when I am through, clear and able to leave? It would not be a matter of the UKBA having to publish that information; what I want to know as a passenger is the length of time between landing and my being out of the airport. I cannot see any reason why the airports could not collect and publish that data.

Mrs Villiers:  We certainly do not see the UKBA as a service provider in that sense—the UKBA has important border security functions. It reports to the Home Office and it would be inappropriate for the CAA, as the aviation regulator, to impose transparency and regulatory requirements. Having said that, as I said to Mike, the Home Office is responding to the points that have already been made in this debate to see if it can start to deliver more of the type of transparency that colleagues would like to see. It already publishes data on a national level and will look at whether it would be possible to publish more information on a port-by-port basis, which it would be prepared to share with the airlines and the CAA.

Q 183

Nigel Mills: My point was that we would require the airport to publish the time it takes from gate to exit. I am not sure that I necessarily want or need to know the components of each particular queue or even the fact that at some airports there is a 20-minute walk from the gate to get to the border agency desk, as there was at terminal 3 at Heathrow this week. It is about requiring the publication of how long it takes to go from the landing time I can see on my ticket to being clear of all the stuff I have to do at the airport. I cannot see that one component being the responsibility of somebody else prevents the publication of that total time.

Mrs Villiers:  That is certainly an interesting idea, and the concept of looking at the entire journey though the airport is one in which passengers are interested. What the UKBA has been doing at Gatwick is an interesting example of a pilot that has seen more integrated working between it and the airport operator and the sharing of additional data compared with that available at other ports. That is an example of where the UKBA is already engaging and starting to respond to some of the concerns that my hon. Friends have raised and, indeed, were raised by the Government’s south-east airports task force. The UKBA may be prepared to consider such an approach elsewhere in the future, which would benefit passengers.

Q 184

Roger Gale: Good afternoon, Mr Hatfield. Thank you for joining us. You are not running late; we are ahead of schedule, and the Minister has introduced you in your absence. Thank you for being here.

Richard Hatfield:  That is very kind.

Q 185

John Woodcock: Minister, you have heard today that even the leadership of the CAA is positive and open-minded about the idea of being subject to value-for-money assessments by the NAO. Do you continue to believe that the CAA should be the only regulator outside of that orbit?

Mrs Villiers:  I do not see a need for the NAO to become involved in the CAA’s activities. The CAA is already subject to audit and scrutiny. That was, of course, considered by the previous Government and the Pilling report, neither of whom concluded it to be a necessary change. The simple fact is that the CAA is not dealing with public money; it is dealing with the money of the aviation and airline industry. The CAA is funded by the industry, and the NAO’s functions are primarily focused on taking account and keeping track of taxpayers’ money. The NAO does a fantastic job, but I do not see that the current arrangements are inadequate. I find it quite instructive that, as far as I can see, not one piece of evidence to the Transport Committee mentioned this as an issue of concern to the people affected by the Bill.

Q 186

John Woodcock: But you recognise that the CAA would be unique among the economic regulators if it were not subject to the NAO? What is the reason for that?

Mrs Villiers:  As I have said, the CAA is an economic regulator funded by the industry, and the NAO is tasked with keeping track of taxpayers’ money. I draw on the work done over a number of years that concludes that there is not a pressing case to bring the CAA within the NAO’s remit. I have not heard, as yet, anyone give a strong reason why the NAO would make a difference or achieve a result different from the current means by which the CAA’s functions are audited and scrutinised.

Q 187

Iain Stewart: Minister, may I return to the publication of consumer information? This morning, I asked Mr Haines from the CAA about the role he envisages for the new consumer panel in determining the type of information that should be published and made available to air passengers. My interpretation of his response is that he regards the consumer panel as just one of several bodies that will shape that information and its role will be rather organic. Are you satisfied with that, or do you think the Bill should be a little more prescriptive in setting the consumer panel’s role?

Mrs Villiers:  I do not see a need for additional prescription on that in the Bill. As I hinted in the question I asked this morning, my view tends to be that, when one is looking at the passenger interest, research is a key part of effectiveness, which is why Passenger Focus is effective in the rail and bus market. I know that the CAA includes that as part of the plans for its consumer panel. Another key element, which is important for an effective consumer panel, is a degree of independence, and it is very much part of the CAA’s plans that the panel will have such independence, so that it can act as a critical friend and challenge the CAA on its approach to consumer issues.

Q 188

Simon Wright: What further specific requirements on the CAA to take environmental factors into account were considered, but ultimately not included in the Bill? Why was that?

Mrs Villiers:  I am pleased that someone has brought up the environmental issue, because I want to be absolutely clear that I yield to no one in the seriousness with which I take the environmental impact of aviation—particularly noise, but also carbon. Throughout my time in Parliament, I have always been rigorous in asserting that we need to take seriously the environmental impact of aviation, and that of course requires, in appropriate circumstances, legislation and regulation. My point is that airport economic regulation is not an appropriate vehicle for delivering that kind of environmental regulation.
The Bill, as drafted, clearly gives the CAA the ability to authorise investment that has an environmental focus. That has been the case under the old regime, and the CAA is confident that it can continue to authorise such investment, because that is ultimately in the passenger interest, which is what the CAA is being asked by the Bill to protect. We need to take seriously the environmental impact of aviation, but adding in environmental duties and placing them on an airport simply because it is subject to economic regulation is not the right way forward. We need to look across the board and impose whatever regulation is necessary depending on the environmental impact of the airport and not whether it wields substantial market power.

Q 189

Kwasi Kwarteng: I would like to ask about ATOL, and my question is probably not the one that you think I am going to ask. Were there any discussions in the Department about the possibility of actually getting rid of ATOL altogether?

Mrs Villiers:  We certainly discussed whether we should look to scale it back and challenge consumers to go out and sort out their own travel insurance. ATOL going completely was never on the table, because we are required by the package travel directive to ensure that consumers who buy packages in the traditional sense—the narrow legal sense—are protected in the event of insolvency. That is compulsory, so there would be no question of removing ATOL protection.
We did look seriously at the option of trying to use transparency as a way to fix the problem of many people thinking that they are buying a protected holiday when they are not, but, for many of the reasons aired earlier this afternoon by ABTA, we just did not think that that would work. It would be difficult to generate an effective transparency requirement. At the moment, the insurance industry is certainly not producing products that have the extent of protection that ATOL gives, and there is a reason for the Government intervening in this market. The reality is that, at a time when people’s incomes are squeezed by current economic circumstances and when a significant chunk of their annual income may be devoted to a holiday, it is entirely reasonable for the Government to step in to help to ensure that money is protected in the event of insolvency—where it is reasonable to do so. People expect protection, and they want protection, so extending the scope of the ATOL scheme to more holidays is a responsible thing to do to help to protect people’s hard-earned cash in the event of a travel company’s insolvency.

Q 190

John Woodcock: That sounds like a firm commitment. Is that right? If so, are you prepared to go beyond the enabling power in the Bill and actually write it into the Bill?

Mrs Villiers:  We have a firm commitment to extend ATOL protection. We are committed to extend it to flight-plus holidays sold by travel agents and tour operators, and we will soon be presenting to Parliament secondary legislation to that effect.
In the Bill, as you say, there are enabling provisions that would allow the Government to bring airlines that are selling flight-plus holidays into the scheme. We think there is a case for doing that—broadly for some of the reasons I have just ventilated, about the general case for extending ATOL protection—but we have not made a final decision yet on whether to activate the enabling powers. Before we do that, it would be very important to conduct an appropriate impact assessment and to consult thoroughly all the parties that could be affected. In terms of good governance, it is important that we have all the evidence on the table before we take a decision on how far we extend the ATOL scheme.

Q 191

John Woodcock: Thank you. My final question is on the concerns we have heard today about transferring the security function; do you dismiss those out of hand?

Mrs Villiers:  Of course, it is very important to listen carefully to all points of view; that includes the work force and those who are delivering the services on the ground. A lot of detailed work will need to be done before the transfer can take place to the CAA. We are convinced that we can make this system work, but getting the practicalities and the details right will be the work for the next few months. That is one of the reasons why the transfer of responsibilities does not take place immediately, but is scheduled for 2014—if I have got that right.

Richard Hatfield: indicated assent.

Mrs Villiers:  We have a working group focused on this very closely. We expect to be able to produce a note for the Committee when we get to that part of the proceedings, perhaps to give you some more information about how we see the practicalities of the transfer going forward. We remain convinced that this will be a positive move, but we appreciate that a lot of careful work needs to be done, to ensure that it works well in practice.

Q 192

Chris Heaton-Harris: It is very good to see you, Minister, because when I spoke in the Second Reading debate, you were doing something else—being fixed after your cycling accident.

Mrs Villiers:  Yes, I was on the operating table, literally.

Q 193

Chris Heaton-Harris: I suppose that is a half-reasonable excuse for not being there. I want to ask for clarification on the Department’s plans for a more efficient, outcome-based approach to aviation security regulation. The Under-Secretary of State for Transport (Norman Baker), who was on the Floor of the House at the time, kindly wrote back to me. I want to clarify a point, because he said:
“The outcome-focused regime will take several years to be phased in.”
What does phasing-in mean in this circumstance? There is a difference between big and small companies, and how they would be able to work this?

Mrs Villiers:  I have a personal interest in this, because I will be the first aviation Minister who sets the alarms off every time I try to get on a plane, now I have a chunk of titanium in my collar bone.
With the outcomes-focused, risk-based approach to regulation, as we have heard from witnesses, part of it is giving more responsibility to the airports to decide how best to deliver the outcomes, and to develop systems to deliver the outcomes that can then be approved by the regulator as valid and workable. It is not a question of the Government saying, “Right, here is your outcomes-focused, risk-based regulation. Get on with it.” It is a two-way process, so the airports look at how the processes are working and devise ways in which they can deliver security effectively. It is not a single process; it is each airport looking at some of the best ways to do it. That is one reason why the change is inevitably going to be gradual; some people out there at the front will want to get into their own special outcomes-focused approach, while other airports might want to stick with a more traditional approach and move at a slower pace.
Another reason why it will be gradual is that there is a debate, because a lot of security regulation is determined at an EU level and there is scope—even without any changes at an EU level—to use an outcomes-focused, risk-based regime. However, if we want to use it more broadly, we also need to win the arguments in Europe. There is every reason to believe that Europe may want to head in that direction as well, but, as you will be well aware, the processes in Europe do not often tend necessarily to be very fast. Again, the extent of the coverage of this new approach will slightly depend in the longer term on whether we can get changes in Europe. Richard, would you like to talk about the process of introducing outcomes-focused measures?

Richard Hatfield:  The Minister has picked up two of the main reasons. The third part of this will actually be done through trials. We are not going for a big-bang approach. We will try some of the new ideas probably at less obviously risky airports or threatening environments before industry rolls them out on a wider basis. Taking the point at the start of this sequence about not doing anything unduly risky, we think this is a very sensible way to move. We want to try some of these ideas before we put the whole weight of the new approach upon them. That is the third element of why we are proposing to phase this in.

Roger Gale: Mr Mills, are you still interested?

Nigel Mills: Very much so!

Roger Gale: I kept you waiting; I apologise.

Q 194

Nigel Mills: Minister, when we are looking at reforming how ATOL works, I guess you will have heard of the problems many schools have had with Skiing-Europe, which effectively went bust. The way it satisfied the requirements of the package tour directive was by having insurance for financial insolvency. Then, the insurance company promptly decided that it had fraudulently obtained the policy and cancelled it. That meant there was no protection for people who had validly booked a package holiday. Have you considered, when reforming ATOL, whether there was any need to reform how the whole directive is applied, to make it work properly in all situations, as well as just for air transport? Should we just move to a situation where it is all bonded and not insurance-based, or should there be some stronger rules so that insurance companies cannot weasel out in cases where they have not done their checks before accepting the policy?

Mrs Villiers:  I agree that what is in the Bill is only an element of a wider reform of ATOL. There have certainly been various cases where problems have arisen: people thinking they were protected and it turned out they were not; or even holidays that should have been protected, except that the appropriate payments had not been made. The CAA is very focused on trying to remedy those issues. There has been some progress.
In particular, what we are seeking with the ATOL certificate is an important way to ensure that the whole system works better, so that people get used to the concept of asking for the certificate, and that they have greater certainty that when the agent says it is covered, it genuinely is. Part of the strategy that the Government have on ATOL, alongside the CAA, is to try to raise awareness of ATOL as a scheme, and to raise awareness of the importance of consumers checking whether they are covered and preferably getting hold of a certificate as further reassurance. That is an important part of the secondary legislation, which we are taking forward in parallel to the reforms in the Bill.

Q 195

Nigel Mills: On a separate topic, one of the issues associated with scarce airport capacity is that what might be the most profitable route for airlines or airports may not be in the best interests of consumers across the country overall. I wonder whether certain slots into Heathrow might be at risk from Scotland or Belfast, following the sale of bmi. Do the Government think there is a need for Government or regulator involvement there, or should it just be left to the market to decide?

Mrs Villiers:  I know it is an issue of concern to many, and indeed it was raised this morning in the Chamber. As things stand, EU rules would prevent any kind of intervention by the Government. EU rules require slots to be allocated by an independent organisation, with airlines free to decide how they use those slots. We think that the competition in UK aviation has brought huge benefits to consumers, so we would need to proceed with great caution if there were any question of intervening in that free competition. We certainly have the opportunity, with the discussion of the airports package in the EU, to look at these issues. We are absolutely adamant that regional connectivity is crucial for our economy. That is one of the reasons why we are pursuing HS2. We will, however, in our overall work on our aviation strategy, keep in mind the importance of ensuring that we continue to have excellent regional connectivity between the rest of the country and the London airports.

Q 196

Nigel Mills: Would you like to make any guesses or predictions as to how many airports need to be economically regulated by the CAA when it gets the power? Do you think it will stay at three, or do you think there is some scope for the figure to come down?

Mrs Villiers:  The ethos of the Bill is to take that decision out of the DFT and to ensure that it is made by an independent regulator. I am slightly nervous of setting hares running unnecessarily, so I might refrain from answering that.

Q 197

Nigel Mills: But you would be extremely surprised if any more airports became economically regulated in the medium term?

Mrs Villiers:  I see no evidence of any airports heading to the market power level that would bring them within the remit of the current rules or the rules we are debating in the Bill.

Roger Gale: Any further questions relevant to the Bill?

Q 198

John Woodcock: My question is supremely relevant to the Bill. What do you think of the point, made by BAA this week, that the market power clauses are unnecessarily complex and you could have something simpler in the Bill, with the CAA being given more flexibility to shape the test?

Mrs Villiers:  We think we have maximised the CAA’s flexibility. Again, this is a key thrust of the Bill, so it is impossible to sit here now and work out with confidence all the things we will need to do to protect passenger interests over the next 20 years. We want to give the CAA as much flexibility as possible. There are certain limits—we need to ensure, for example, that the CAA does not accidentally start regulating car parks. We have to have some limit to ensure that the CAA’s focus is on airports and so that we do not, by accident, bring its remit to cover all sorts of other areas. We will engage carefully and closely with BAA to understand its concerns on this issue, but I hope I have given it some reassurance that the Bill will not operate in the way it fears it might. Robert may want to come in and talk specifically about the points that BAA made.

Robert Catherall:  The Bill has been drafted to ensure that there are several possibilities regarding how airports can operate in the future within that regulatory framework. It is important that the Bill be able to allow for multiple operators to be regulated, which the current framework—the Airports Act 1986—would not allow. That requires, as the Minister said, defining the airport, and that is partly where the complexity comes from. However, it is important to deliver that policy. [Interruption.]

Roger Gale: For the benefit of the record, and because I, too, believe in transparency, I was just being asked whether it was possible to extend the evidence session to bring in the Minister for Immigration, the hon. Member for Ashford (Damian Green) to talk about the work of UKBA in arrival halls. The feeling is that that is outside the scope of the Bill, which is why I said no. There are one or two other issues as well.
Are there any further questions for the Minister? No. At our next sitting we will commence clause by clause consideration of the Bill. I thank you, Minister, and your civil servants, for joining us.

Ordered, That further consideration be now adjourned.—(Iain Stewart.)

Adjourned till Tuesday 28 February at half-past Ten o’clock.